If games online are free, how do game developers earn?

[rivalsaga]

Just wondering, if games online are mostly for free, how do game developers earn? Are ads even sufficient enough to cover all the expenses in running the game?

[Nox]

+ premium accounts, maybe donations

[JGadrow]

There are two answers to this. A long answer and a short answer.

Short answer: They don't. That's why you see so many games that die shortly after being launched. They fail to get enough revenue to pay the bills and, eventually, the owner can no longer support the costs. Don't go into BBGs for money unless you already HAVE money. It's the typical Catch 22.

Ok... LONG answer:

Advertising can be HUGE revenue if you have the traffic for it. I should know, I work for a company that DIRECTLY markets and sells ad space on their sites. So, it's enough to support the server cost PLUS pay the salaries of my department (and probably a portion of the marketing department's salaries) AND turn a profit. Basically, you charge an advertiser to appear a guaranteed number of impressions over a period of time. Usually, the advertiser gets FAR more impressions during that time but you give them a guaranteed number so that if you have slow traffic, you simply extend their ads life-time. Here's an example of one of our ad specs for one of our sites:

Skyscrapers  ($750/month) appear run-of-site, rotating through all available pages, including the home page, general message boards, classified ads, search pages, directory pages and all channel pages that do not have an Exclusive Channel Sponsor.

Specifications: 120 x 600 pixels (50K maximum file size). GIF or JPG format preferred; HTML and Flash file formats accepted. A link back to the advertiser's site must be included in the file if providing in Flash movie file (.swf) format.

On that website alone, I count 3 of that particular ad zone. We have 4 other ad zones which have their own individual costs as well as exclusive advertisements that we sell for a healthy price. And that's in this current economic state where we've been experiencing advertising reductions! So, you can see that advertisers WILL pay if they think that it's a valuable trade off.

However, you can't get that kind of income without traffic. Now, you can also come up with clever ways to monetize individual player resources. Such as allowing them to remove advertising or giving them game perks. However, as long as advertisement is unobtrusive, most players actually don't mind it! So, my line of thought is to offer individuals the ability to purchase subscription components.

Basically, if they don't want advertisements to appear you charge them $1 per month or something reasonable. Now, if they want game option X they pay $5 per month, game option Y costs $2.50 per month, etc.

In this way, you let the player control their total cost (which always makes the user feel like they're getting a better deal) and give them just the features they desire. And, if they don't turn off advertising, it's more traffic that you can report to your prospective advertisers.

Monetizing a game isn't really the hard part. Getting the TRAFFIC to be able to monetize the game is where the challenge lies. It's the same concept as television advertisement: the programs with the highest viewer rating cost the most to advertise on because you're reaching a larger audience. In the world of the internet, this can be worth it to advertisers for purpose of brand recognition AND because it's actually a possibility to target their individual market demographic if setup correctly!

However, the hard part of directly selling advertisements lies in the sales team. The theories behind how to monetize a web property aren't all that difficult to imagine. However, many web games are little start-up ventures by a small number of individuals who don't have the resources available to capitalize in a meaningful manner. Which results in limited earning potential.

[OBY]

Alternative currency:  Points, Xtra turns and so on.  The serious players will players will pay to get an advantage and points/turns can give them that advantage.  Neither one is required to play, so normal players wont feel the need for them.

[jannesiera]

Nicley explained, Makari! (reputation +1, you deserve it! )

[Quantz]

Don't go into BBGs for money unless you already HAVE money. It's the typical Catch 22.

I don't really agree with you here. All you really need to start a BBG is about $10/month and that usually now comes with a free domain. If your site is getting more traffic than this kind of hosting can handle obviously you would be making enough money from advertising to purchase bigger and better server technologies.

Unless you are considering that time is money, then I agree with you. As making a BBG can take loads of your time. But, if you have the time to make your own BBG, start up server costs are negligible.

[Scion]

Just wondering, if games online are mostly for free, how do game developers earn?

the vast majority of us have a day job

In addition to add revenue or subsriptions a fairly recent trend in monetisation is the sale of virtual goods....that is items or facilities that are otherwise difficult to get or not directly available in game using either microtransactions or some form of ingame currency.

Virtual goods may or may not provide an ingame advantage....it would depend on the style of game....in a lot of the customisation type games (games where you customise something, a shop, house, avatar, pet, plant, rock....) people will by items just to be different.... In a pvp style environment they will buy them purely for the advantage......

[cpvr]

Just wondering, if games online are mostly for free, how do game developers earn? Are ads even sufficient enough to cover all the expenses in running the game?

How do you expect them to earn? Yea, ads are sufficient to cover all costs if you have the traffic numbers to back them up.

Such as a site receiving 1,000 daily uniques with 20k to 50k daily pageviews would make pretty good money, but a game with only 250 daily uniques and 5k daily pageviews won't make much.

Game developers also make money off of advertisements and also account upgrades if you own a pet game.

I know of a few pet game owners making well over $20k/month.

[pavansss91]

Hi there

Such as a site receiving 1,000 daily uniques with 20k to 50k daily pageviews would make pretty good money,

u said they make good money. But i would like it i have a small estimation.
How much daily revenue can a game earn if it has 5000 unique visitors everyday ?? (takin only ads into consideration)

Does it increase or decrease if we use google adsense ??

[Mufasa]

Actually, not as much as you think. Let's take a good CPM company with a rate of 30 cents (since the economy is crap and you'll take that and like it). With 5,000 unique visitors (assuming all of them are elegible to be served ads) that's $1.50 per day per ad slot (assume a banner and maybe a sky or cube).

$90 per month might BARELY pay server bills. As for the pageviews? Unless you have other companies in your chain, don't expect them to matter much. Most companies pay for the first, and sometimes up to the third impression. Meaning after 3 pages, that user is either seeing crap ads or no ads at all.

It takes BIG numbers to make CPM worth it, which is why smaller, niche sites, tend to do better with targeted CPA campaigns.

cpv, I didn't click the link, but I was a member on VPL for over a year and I didn't really see any site owners there that knew how to monetize a site properly (mainly due to the fact that most sites that started up failed not too long after)

[JGadrow]

Agreed, these ad companies do not net much income. The key to successful revenue generation through advertising is direct advertising sales.

It's the same concept as television advertising: An advertiser pays a specified amount for a given amount of time. In the world of the web, this usually amounts to a month. The trouble with this method is, obviously, that you need to sell the ads by direct marketing. However, if you have the traffic (and can prove it) companies will pay to advertise on your site.

Look for tie-ins that others don't normally think of. What advertisers would want to advertise on a game? How about Mt. Dew, Pepsi, Coke. Pizza hut, Doritos, Cheetos, etc. Companies know their target demographic and 'computer gamer' is definitely in the marketing demographic for snack / junk food companies. Show them the traffic and they'll probably show you the money!

[pavansss91]

Ok if i want to sell my ad-space to other gaming sites how much can i bill them for this 5,000 unique visits per day ?? (or maybe 10,000)

[Mufasa]

There's no magic formula here. It depends on the ad, where it's displayed and how much QUALITY traffic you can deliver. One route is to use projectwonderful.com - this way the market can determine how much your traffic is worth to them.

Running through PW for a while can give you an idea of what kind of return an advertiser can see by advertising on your site, which will help you set prices in the future should you decide to sell direct.

[JGadrow]

Agreed. Just starting out, I would try some aggressive marketing strategies. Keep your site traffic details handy and try and sell one of your ad units for a price you think is reasonable. I know that my previous employer sold their skyscraper ad space for about $750 per month. And these were ROS ads, not exclusive. However, I wasn't privy to their statistics so I can't say how close you come in terms of traffic.

There are two routes that you can take: bid low and for each next sale go a little higher until you start getting too many refusals. Or, bid high and keep going lower to find a price that advertisers will start purchasing ad units.

It might help (especially if you chose the 2nd method) to state that you're new to direct-sell advertising and are trying to gauge pricing. It helps to have inter-personal skills here. As long as you're pretty up front with the person you're dealing with and let them know that you're willing to reward them in some manner for giving you a 'fair' estimate you'll probably do very well. One of the keys to successful sales is building a good relationship with your clients. People are more willing to purchase from someone they view as honest and trustworthy.